A Worthy Investment
On one end of the spectrum, there’s Bill Eveland. On the other, there’s Charlie Rich.
Eveland is the owner of Eveland Bros. Collision Repair Center. His shop, located in Shawnee Mission, Kan., employs 34 people and pulls in $7.1 million per year.
Rich is the vice president of business development for Fix Auto, which employs 1,800 people at 104 shops that pulled in over $275 million in annual revenue in the U.S. in 2016.
Two industry professionals, two entirely different scales—and one question on each of their minds:
How can we thrive on OEM certifications?
OEM certifications are nothing new, but the pressure to obtain them as consolidation makes the collision repair market more competitive each year has reached new levels, says Eveland, whose shop is certified with Mercedes-Benz, Jaguar Land Rover, Tesla, Infiniti, Honda and Chrysler. Which is why—as expensive as those certifications can be—he knows this is the future, and he needs to be ahead of the curve.
“Soon it’s going to be impossible to repair a car if you’re not certified or don’t have the proper equipment,” Eveland says. “It’s so technical now, that if you’re not trained on the car, you’re opening yourself up to liability issues.”
And since both Eveland and Rich view the requirement of OEM certifications as an inevitability for the collision repair industry, they’ve made ROI a top priority. Through market research, branding and OEM partnerships, independents and MSOs are shaping their businesses around OEM certifications and ensuring a significant ROI is possible.
Concerns All Around
For some, these numbers are troubling—for others, there’s opportunity.
So, those numbers: The number of dealership-owned collision repair centers declined by 33 percent from 2006 to 2010, according to industry research and consulting firm The Romans Group LLC; in addition, the J.D. Power 2016 U.S. Initial Quality Study found that expected reliability is the most important consideration for 49 percent of car owners when purchasing a vehicle and greatly affects brand loyalty.
These numbers are troubling to Jeff Hilton, wholesale parts and collision manager for Toyota, who expects independent shops to match dealership quality.
These numbers, adversely, are seen as an opportunity for Josh Govenor, marketing director for the Las Vegas shop Sudden Impact Auto Body, which dropped all its DRPs two years ago and decided to concentrate solely on OEM certifications.
“Manufacturers noticed customers were going to repair shops to get work done, even if that shop had subpar knowledge of the technology,” he says. “The customers would get their cars back not fixed correctly, and then a majority of those customers would go to another brand. So manufacturers want to work with us.”
For all the importance he places on becoming OEM certified, Eveland understands why shops across the country are balking at the trend. Because even after colossal investments (you can expect to pay $150,000 in equipment and another $50,000 in training and certification fees, he says), it’s the continual costs afterward that make a substantial return seem near impossible.
“The problem is it’s not a one-time investment,” Eveland says. “They all require different welders and frame machines and equipment that essentially do the same job.”
“It would be nice if the OEMs would all get together and meet halfway on these things,” Eveland adds, “but I doubt they ever will.”
Actually, Rich was worried about the same thing, which is why he started the Collision Industry Quality System (CIQS) Committee.
The ROI for MSOs
The CIQS Committee—which meets periodically at the Collision Industry Conference—features representatives from OEMs, insurers, vendors and Fix Auto that meet to address issues affecting all parties, including the daunting costs that come with certifying under several OEMs.
“One of [Fix Auto’s] underlying concerns was we might be hitting all the right KPIs, but maybe not delivering full quality and safety,” Rich adds. “The customer might be satisfied with their fixed car, but what about underneath the sheet metal? The structural quality of the vehicle? How do you quantify that? That’s not easy to do.”
Thus, the ultimate goal is to design a “repair standard,” as Hilton puts it—a uniform system that allows OEMs to meet halfway on certain tools and repair procedures.
“All of the OEMs have varying repair methods, so I think it’s really important that a repair standard recognizes the OE repair methods,” Hilton says.
Ideally, the results satisfy both OEMs and collision repair shops: The OEMs compromise on equipment and a process that ensures safety and quality repairs, and shops can buy less equipment and still satisfy several OEMs.
When it comes to researching local markets and demographics, MSOs’ inherent ability to load level gives them an advantage over independents, Michael Macaluso, president of CARSTAR North America, says.
“I think that’s the value we can bring, to our customers and insurance partners,” he says. “We can manage all of that through our call center, IT platforms and marketing with our store owners.”
Fix Auto, CARSTAR and Service King all indicated they will evaluate markets and certify as many shops as it takes. For instance, if the Ford demand was low in a certain area, they would only spend money to certify one shop and then load level Ford work to that facility.
Jeff McFadden, president of Service King, says his company is making strategically placed investments in upgraded tools, training, dedicated personnel and state-of-the-art designs inside its repair centers across the country based on market data, including opening “one of the most advanced facilities in the state of California,” a 70,000-square-foot location that has the capacity to repair 600 vehicles per month, he says.
“A significant aspect of that effort is centered on strategically meeting OE certifications, because we believe it fits the evolving need of our customers and the changing landscape of vehicle technology,” McFadden says.
A Shift in Branding
A shift in branding will likely occur for MSOs, in order to market their OEM investments. However, Rich, Macaluso and McFadden all indicated that a focus on OEM certifications won’t take away from marketing DRPs, which make up well over 80 percent of their work mixes.
Macaluso says the DRP-OEM work mix at CARSTAR—which obtains 85 percent of its work through DRPs—could even out in the near future, but said it could also very easily travel the other direction.
“Our ideal state is we can work with insurance partners and OEs to try and work together for the right repair for the customer,” he says.
The ROI for Independents
Replacing DRPS with OEMs
Josh Govenor, once again, sees an opportunity here: If MSOs aren’t willing to part with their DRP models and brand themselves as OEM-focused?Independents will capitalize.
In coming years, Govenor says he believes many shops will follow Sudden Impact’s model, dropping DRPs and adopting OEM certifications as a legitimate alternative. In this sense, he believes independent shops have an advantage over MSOs, which he says have largely built their brands based on ties with insurance companies.
“[Insurance companies] are behind the times, and they’re going to have a wake-up call when certifications are the norm,” Govenor says.
“The insurance companies want to drive the lowest price possible, and that just doesn’t compute with the costs of OEM certifications,” Eveland adds.
As they have moved away from DRPs and changed their business models, Govenor and Eveland have begun to fully market their OEM certifications to the public.
“Next year, we’ve got a full plan to do a lot of social media, TV and radio advertisements, billboards that sell our OE certifications,” Govenor says. “Our biggest thing is we’re trying to educate the consumer that they have a voice, and that their best interest is a facility that has invested the time, training and money and equipment for learning how to properly repair each manufacturer’s vehicle.”
Capitalizing on Luxury OEMS
On the Mercedes-Benz website, you can search for certified shops in the automaker’s network. If you type in the 66203 zip code, you’ll find Eveland Bros. Collision Repair Center listed.
But expand that search by 50 miles? You’ll find nobody else.
One hundred miles? Nothing.
One hundred and fifty miles? No dice.
To be exact, you’ll have to stretch it out to 201.51 miles before finding another shop. In the entire state of Kansas, Eveland Bros. is your only option if you want a Mercedes-Benz-certified shop.
And that’s not by accident.
Back in 2004, Bill Eveland knew the steep costs of becoming Mercedes certified. It’s even more expensive today, with the growth of in-vehicle technology in luxury automobiles, he says. Yet—as if those earlier numbers didn’t make it completely obvious—being the only shop with Mercedes expertise has its perks.
“We bring in a lot of outside business,” he says. “We reach out beyond a 200-mile radius on a lot of different makes.”
Eveland saw an opportunity to fill a void for high-ticket, low-demand repairs, which has allowed his shop to lower its car count by 40 percent over the past 12 years, while increasing annual revenue by 35 percent.
Being the only facility certified in luxury OEMs in his area allows Bill Eveland to effectively negotiate with insurance companies for competitive rates.
“[The insurance companies] can’t threaten to take the vehicle somewhere else because the customer wants a certified shop, and I’m the only shop qualified to do the repair,” Eveland says.
Because of that, Eveland is able to charge two levels of higher labor rates for more expensive certifications. First there is a specialty rate, which is $85 per hour across the board for luxury makes; and then there’s the specialty plus rate, which is $115 per hour for heavy structural, engine-out work.
“It takes longer to fix those cars. It’s not unheard of to do $60,000 on one repair,” he says. “We do a lot of stuff in $30,000 range.”
Much like the MSOs use market research to study regional car make-ups and load level work, Govenor says independents have numerous resources available for ensuring OEM certification costs will return the favor.
Using propensity reports provided by his paint company, Govenor tracks vehicle makeup, growth patterns, average demographics and median income in the Las Vegas area. Armed with that knowledge, Govenor then markets his shop to dealerships without body shops in his area, with hopes of getting enough cars through to justify the OEM certification costs. This has led to Sudden Impact becoming certified in Nissan, Honda, Hyundai, Chrysler, GM and Ford.
“Data management is a huge aspect of what we do, making sure we’re getting our best bang for our buck,” he says. “With our management system, we can break it down by make and model. We can run all our data that way and see if it is cost-effective for us to keep Hyundais.”
Being an independent, family-owned shop, Josh Govenor says he has an advantage when it comes to partnering with dealerships and reaching the automakers directly.
“I think what separates us is our customer service, our personality,” he says. “I go out to the dealer shops personally and get to know the service departments and managers. And that personal relationship grows into a business relationship.”
Citing the J.D. Power 2016 U.S. Initial Quality Study, Govenor says dealerships see the benefit in sending business to a certified shop, as that dealership is then more likely to retain that customer for future vehicle purchases.
“We’ve gone to them even before we’ve finished with certification, just to let them know, ‘We are working towards this,’” he says. “We are building our confidence in them, knowing that we are investing in their brand to better serve their customers.
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